UPS and TNT fail to deliver £4.3bn tie-up

SHARES in delivery firm TNT Express slumped more than 40 per cent yesterday after its long-awaited €5.2bn (£4.3bn) takeover by United Parcel Service (UPS) collapsed under regulatory pressure.

Despite efforts to appease the European Commission with offers to amend the deal, the firms were told on Friday that the EC intended to prohibit the purchase.

UPS said in a statement it will pay a €200m break fee to withdraw its offer, ending almost a year of discussions between the firms.

The European Commission said its formal decision is not due until 5 February. The body has prohibited around 20 deals on competition grounds in as many years.

The regulatory roadblock leaves Amsterdam-listed TNT without a permanent chief executive or long-term strategy as a standalone company.

FedEx, which had complained to the European Commission about the proposed deal, is not thought to be preparing a bid for TNT, while analysts said an offer from larger rival Deutsche Post was unlikely to gain competition clearance.

Shares in PostNL, TNT’s biggest shareholder which had been counting on using proceeds from the deal to pay investors a dividend, plunged a third on the news.

Hedge funds were left nursing losses of more han $700m after the collapse of TNT’s shares.

Merger arbitrage funds are estimated to have owned around 30 per cent of TNT shares before yesterday’s announcement, a source told Reuters.

ADVISERS UPS PURCHASE OF TNT

FIONA CARLIN & GAVIN BUSHELL
BAKER & MCKENZIE

AFTER almost a year of talks about the finances of the £4.3bn postal purchase, the deal was finally felled by legal tangles.

Antitrust lawyers from Freshfields acting for UPS and Allen & Overy partner Paul Glazener for TNT Express learned last week that the European Commission planned to exercise its right to prohibit the deal.

FedEx, which successfully lobbied on competition grounds to the EC, hired Baker & McKenzie as its legal advisers. The team was led by Fiona Carlin, head of the firm’s European and competition law practice in Brussels, and Gavin Bushell, a partner in the same practice (both pictured left).

The collapse of the tie-up between “Taurus” and “Utah” (the codenames given to the firms in the deal’s early stages) has cost the financial advisers an estimated $55m (£34.2m) in fees. UPS’s financial advisers Morgan Stanley, Bank of America and UBS would have shared around $25m to $30m, according to Freeman Consulting. TNT’s bankers, Goldman Sachs and Lazard, along with Deutsche Bank, which helped the Dutch group's largest shareholder PostNL, would have split the remaining $20m to $25m, the data consultant estimated yesterday.